Cattlemen study how to wrangle premiums from diverse market

Monday

Dec 10, 2012 at 3:22 PM

Beef brands, marketing claims and certification seals increasingly confusing to consumers also muddy the water for cattlemen trying to produce a premium product while raising cattle in a way that is financially as well as environmentally sustainable.

By Candace Krebs

DENVER — Beef brands, marketing claims and certification seals increasingly confusing to consumers also muddy the water for cattlemen trying to produce a premium product while raising cattle in a way that is financially as well as environmentally sustainable.

With that premise in mind, the Western Center for Integrated Resource Management at Colorado State University hosted an educational workshop recently to introduce producers and graduate students to a variety of beef marketing perspectives.

The workshop was provided with support from the National Western Stock Show Scholarship Trust Fund in honor of Nick Petry, a longtime stock show enthusiast. It was held on the third floor of the National Western Expo Center, which in another month will fill with millions of visitors as the annual show kicks off Jan. 12.

A new culinary worldConsumer interest in grassfed, natural, organic and local doesn’t always translate into clear market signals for producers. Connecting a specialty meat marketer from downtown Denver with a small cattle producer on the Eastern Plains of Colorado remains elusive, which is why meat scientist, conference organizer and center director Kraig Peel wanted to bring cattlemen together with merchandisers and meat quality specialists.

Pete Marczyk, co-owner of a small Denver retailer that sells rib-eyes for $20 a pound, is passionate about selling local products. But instead of doing business one-on-one with individual farmers, he said he gets about 95 percent of his beef through Niman Ranch, a company that sources natural meat products from 700 growers across the West and Midwest.

As for grassfed beef, Marczyk said he only carries it twice a year when a local rancher butchers an animal.

“I can’t keep it fresh, because I can’t market it,” he said. “Personally, I like it, but I don’t love it.”

More than any other trendy beef attribute, grass finishing offers the consumer a truly unique eating experience, said Dale Woerner, a CSU meat specialist who gave a presentation on beef taste tests conducted by the university.

The flavor differences between grass and grain finished beef are distinctive. Some consumers prefer the grassfed flavor, but many others don’t, probably because they have become more accustomed to grain finished beef, he said.

Even among committed grassfed customers, however, local producers struggle to satisfy the demand. In the arid West, grass beef is a seasonal item, but worse, it lacks consistency, he said.

There’s a reason for the flood of Uruguayan grass-finished beef on natural food store shelves, he added.

“We need to work on our grass finishing systems,” he said. “In South America, they have very regimented systems. They are finishing cattle on grass, not randomly pulling them off of a pasture and slaughtering them.”

Woerner believes the unique environment and infrastructure in the U.S. will prevent it from ever dominating the global market for grassfed beef. But local producers can and should be the preferred supplier to fill local grassfed demand, he added.

“One of the things we’ll be focusing on in the next couple of years is improving our grass-finishing schemes to improve flavor and the consistency of that flavor,” he said.

Consumers are also saying in larger and louder numbers they want their beef from animals raised without artificial hormones and sub-therapeutic antibiotics, for reasons that go beyond taste to include human health, animal well-being and the environment.

Both Marczyk and Cathy East, group director of perishables for Safeway, said naturally raised meats were selling well in their stores.

Safeway initially introduced an organic line of beef but ended it after two years. “There’s only a very small amount of consumers who can afford that,” East said. In its place, the store began offering a natural beef line from animals “never-ever” exposed to antibiotics (if they are ever treated with antibiotics, they are kicked out of the program.) Verification is done with producer affidavits, she said.

Despite being a high-end market, Marczyk said one of the unique things about his two stores is the young age of his average customer, indicating to him interest in natural meats has a bright future.

So far, however, adequate premiums have been slow to materialize, many producers say. Peel joked that many cattlemen found the so-called “never-ever” programs actually translated to “never-ever” making a profit.“The premium doesn’t end up at the producer, it ends up at the packer level,” Peel said.

Producers need to explore direct marketing opportunities or forge relationships with procurement companies, such as Niman Ranch or Oregon Country Beef, which can provide access to the specialty market, he said.

Document, verify and planLeann Saunders, president of IMI Global, one of the largest livestock traceability companies in the U.S. based in Castle Rock, said certified “never-ever” cattle are just beginning to show a premium in the video auctions her company monitors. She estimated the premium at $6 to $8 a hundredweight.

More pronounced is the upshot for cattle certified through GAP, or Global Animal Partnership, a multi-step animal welfare documentation program that allows consumers to pay progressively more for higher levels of humane certification. She pegged that premium at $15 to $17 a hundredweight.

The driver behind it is a decision by Whole Foods Markets to transition 100 percent of its meat case over to the program.

“That changed the face of animal welfare,” Saunders said. “The consumer is willing to pay more for this. It is all market driven.”

To capture the premiums, ranchers often need a way to independently verify their production practices and maintain the identity of their cattle through the modern processing and marketing system. That’s where IMI Global comes in. For a cost that starts at around $250 per operation, it enrolls livestock in a computerized traceability system that can be used to satisfy multiple value-added programs at once. More than 6,000 farmers, feedyards, processors and food retailers are enrolled.

“One of the things we look at is how to bundle several programs,” Saunders said in her keynote presentation. “For example, you might be able to sell the tongue to Japan, the round to the European Union and the middle meats to Whole Foods.”Saunders emphasized that IMI Global doesn’t provide price guarantees or run a market “placement service,” but does look for new value-added market opportunities.

Travis Hoffman, Colorado’s beef quality assurance coordinator who consulted on the workshop’s agenda, said participating producers need to be sophisticated, aware of who their buyers are and how to take advantage of seasonal changes in inventory and demand.

“They can’t just take these cattle to the sale barn in Brush or La Junta and unload them and expect a premium,” he said.